The Deposit Guarantee Schemes Directive

The following Financial Services practice note provides comprehensive and up to date legal information covering:

  • The Deposit Guarantee Schemes Directive
  • Background and introduction to the EU DGSD
  • Coverage levels and payouts under the EU DGSD
  • Participation in the DGS under the EU DGSD
  • Sanctions for non-compliance under the EU DGSD
  • EU DGSD provisions on making a claim under the DGS
  • Stress testing of DGSs under the EU DGSD
  • Review of the EU DGSD
  • UK implementation of the EU DGSD
  • The impact of Brexit on UK DGSs

The Deposit Guarantee Schemes Directive

This Practice Note discusses the key provisions of the Deposit Guarantee Schemes Directive 2014/49/EU (EU DGSD), which requires Member States to establish a deposit guarantee scheme (DGS) to protect depositors and improve financial stability by controlling the risk of a run on the bank. The EU DGSD recast Directive (EC) 94/19/EC (the original DGSD), which was repealed and replaced by the EU DGSD in the interests of clarity as it had been substantially amended over the years. As the UK was an EU Member State when the EU DGSD began to apply, the recast EU DGSD was implemented in the UK. This Practice Note considers both the EU requirements and the UK’s implementation of the EU DGSD, as well as the impact of Brexit.

Background and introduction to the EU DGSD

The EU DGSD is one of two existing EU guarantee scheme directives. The other, the Investor Compensation Schemes Directive 97/9/EC (OJ L 84, 26.3.1997, p. 22–31) (EU ICSD) is discussed in Practice Note: Investor Compensation Schemes Directive.

The original DGSD was introduced in 1994 and only required a minimum level of harmonisation between domestic deposit guarantee schemes (DGSs) in the EU. It proved disruptive for financial stability and the internal market, especially during the financial crisis of 2007–2009. An amending directive in 2009 (Directive (EC) 2009/14) required EU countries to increase their

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